Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage exposure to market interest rates by diversifying investments across different fixed-income market sectors and debt across maturities, as well as by matching a portion of our floating-rate assets and liabilities, either directly or through the use of interest rate swap contracts. Unrealized gains and losses on investments in available-for-sale debt securities are reported in comprehensive income.
The following table summarizes the impact of hypothetical changes in market interest rates across the entire yield curve by 1% point or 2% points as of March 31, 2022 on our investment income and interest expense per annum, and the fair value of our investments and debt (in millions, except percentages):
March 31, 2022
Increase (Decrease) in Market Interest Rate Investment
Income Per
Annum Interest
Expense Per
Annum Fair Value of
Financial Assets Fair Value of
Financial Liabilities
2 % $ 578 $ 202 $ (3,090) $ (7,429)
1 289 101 (1,586) (4,041)
(1) (92) (46) 1,650 4,857
(2) (92) (46) 3,280 10,710
Note: Given the low absolute level of short-term market rates on our floating-rate assets and liabilities as of March 31, 2022, the assumed hypothetical change in interest rates does not reflect the full 100 and 200 basis point reduction in interest income or interest expense, as the rates are assumed not to fall below zero. As of March 31, 2022, some of our investments had interest rates below 2% so the assumed hypothetical change in the fair value of investments does not reflect the full 200 basis point reduction.
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